Social Security Systems

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In the United States, Social Security refers to a set of programs, including old-age, survivors, and disability insurance, for the elderly and their dependents. This particular use of the term "social security" relates as much to the special and delimited character of the welfare state in the United States as it does to the generally accepted meaning of the term. For organizations such as the International Labour Office and the International Social Security Association and for scholars concerned with comparative studies, the term refers to a wider variety of programs. For instance, in its volume Social Security throughout the World, the Social Security Administration states:

The term "social security" in the context of this report refers to programs established by government statutes which insure individuals against interruption or loss of earning power, and for certain special expenditures arising from marriage, birth, or death. (1985, p. ix)

The concept of social protection that underlies this definition includes unemployment programs to cover involuntary temporary loss of work, sickness programs to cover loss of income from sickness and the cost of medical care, disability or occupational injury programs to cover physical limitations on working, family allowances to cover loss of economic status from the addition of members to the family, and social assistance to cover circumstances such as family disruption that cause income to fall below specified levels. Protection of earning power from loss of work or health conditions associated with old age also remains crucial. Still, many of the other programs, more common in the advanced welfare systems of western European nations than in the United States, must be considered part of social security systems.

The relative size of programs devoted to the elderly perhaps warrants the special attention paid to old age in social security systems. Among all expenditures for education and social security programs, those for old-age pensions represent the largest component, averaging 36 percent across high-income nations in 1985 (Organization for Economic Cooperation and Development 1988, Tables 1 and 3). The next largest component, 22 percent, is devoted to health care, which also disproportionately benefits the elderly. Furthermore, the growth rate of programs for the aged has exceeded that for other programs, and in the future, expenditures for those programs will account for an even greater proportion of the total. Spending for unemployment, family allowances, and social assistance represents a relatively small part of social security programs. As Myles (1984) notes, the welfare state is primarily a welfare state for the elderly.

The need for collective protection for the aged or others stems from the existence of economic insecurity. Loss of earning power as a result of poor health, old age, or unemployment remains a possibility for nearly all the participants in a market economy but is uncertain enough to make it difficult to predict loss of income or future savings potential. Traditional protection against such risk in preindustrial societies developed informally through the family. Under ideal circumstances, children and relatives could support parents who were unable to provide for themselves or wanted to step down from their economic role of provider. In premodern societies, social security thus took the form of an intergenerational contract, based on norms of filial piety and parental control over wealth, between children or other relatives and parents (Simmons 1960). Never a guaranteed source of protection, however, other family members became an even less reliable source of support with the decrease in family size, the increase in mobility, and the industrialization of labor that accompanied the demographic and industrial transitions. With the development of large-scale corporate capitalism in the late nineteenth and early twentieth centuries, the risks of forced retirement and unemployment grew. Systems of social security collectivized and formalized the relationship between young workers and elderly, unemployed, or disabled nonworkers. Workers would contribute support to certain categories of non workers in return for the expectation that they would be covered if they became unable to work. The state has always played a crucial role in this collectivized contract by making participation in the systemcompulsory for most workers. Voluntary programs of saving for unexpected contingencies are insufficient because many people are not rational in saving for events that may not occur or occur only in the far future. Private compulsory systems industries, unions, and businesses similarly face problems of incomplete coverage, financial insolvency, and job movement. In contrast, collectivizing social security provides for reliable funding, and it is easier to predict events for a group than it is for individuals.

Most nations provide for more than social security alone. The broader welfare state in capitalist societies also supports education, retraining, full employment, business regulation, price supports, infrastructure, and legal rights. In the former socialist societies of Eastern Europe, social security systems involved broader social protection through guaranteed employment; subsidized food, housing, and energy prices; and the reduced importance of market performance as the criterion for economic support. Recent market-oriented reforms in eastern Europe may expand the emphasis on social security systems as they are typically and more narrowly defined in capitalist societies.

If motives of social protection are common to social security systems, the coverage of the population and the distribution of benefits vary widely. Benefits may be distributed on the basis of at least four criteria, each of which may be emphasized or deemphasized in particular systems. First, citizenship entitlement provides basic benefits—usually in the form of flat-rate cash payments—to individuals or families as a right of citizenship regardless of work history, contributions, or income. Second, employment-related criteria base eligibility on wage or payroll contributions made before the contingency that causes earnings to cease. As a form of public or social insurance, these benefits reinforce market criteria of income determination. Third, need-based criteria provide benefits by comparing resources with a standard that typically is based on subsistence needs. Means-tested or social assistance programs target benefits at the most needy, usually those not covered by citizenship or insurance programs. Fourth, entitlement sometimes is granted on the basis of marital or family status, usually to women and homemakers or families with young children.

To a large extent, nations mix their degrees of reliance on the different criteria. Nations that began with universal systems added earnings-based supplements (e.g., Sweden), and those which originally enacted earnings-based benefits have added universal benefits (e.g., Great Britain) or some form of minimum benefit (e.g., the United States). Similar claims have been made about the mix of public and private systems. To limit inequality, nations that traditionally relied on private systems (e.g., the United States) have increasingly expanded public system benefits, while nations that traditionally relied on public systems (e.g., West Germany) have increasingly expanded private benefits for high-income workers who want a higher return on their contributions.

Some argue that social citizenship remains the most important component of social protection because security is not complete until the state grants alternative means to economic welfare to the market (Esping-Andersen 1989; Korpi 1989). Because meager means-tested benefits are structured to avert work disincentive effects, they fail to emancipate individuals from dependence on the market. Because social insurance benefits stem from labor-based contributions—that is, qualification based on previous contributions defines the right to receive benefits—they maintain links to the market. Because family benefits depend on the qualification of others by virtue of need or contribution, they also fail to detach distribution from the market mechanism. A definition of social security would thus require decommodifying labor or insulating workers from dependence on the market for economic support. According to Esping-Anderson, in decommodifying welfare states,

citizens can freely, and without potential losses of job, income or general welfare, opt out of work under conditions when they themselves consider it necessary for reasons of health, family, age or even educational self-improvement; when, in short, they deem it necessary for participating in the social community. (1989, p. 22)

Few, if any, nations meet the high standards defined by citizenship rights or decommodification. Nearly all nations rely at least partially on earnings-related benefits to supplement universal benefits; flat-rate benefits available to all are too expensive to provide generously for all elderly persons. Still, the trend is toward expanded social rights. Recent efforts to gain the right to protection from economic insecurity follow efforts in previous centuries to gain civil rights such as freedom of speech and equality before the courts and the political right to universal voting (Marshall 1964). This process highlights the dynamic meaning of social security and the continuing evolution of its definition.

Political debate over how far governments should extend definitions of social security to include citizenship rights reflects larger tensions between the relative roles in the market and the state in public policy (Myles 1984). On the one hand, inequality in earnings and contributions during work life means that the market retains a strong influence on social security benefits and the financial circumstances of nonworkers. On the other hand, equality of participation in the democratic political system provides impetus for equality in benefits unrelated to the market. The underlying dynamics of market and democracy—differentiation versus equality—both show in varying degrees in the benefit structures of different systems and debates over the definition of what social security should provide.


A formal social security system was slow to come to the United States. The first public social security system (although limited in coverage and generosity) emerged in Bismarckian Germany in 1889 and was followed by systems in Denmark in 1891, New Zealand in 1898, Austria in 1906, and Australia and Great Britain in 1908 (Social Security Administration 1985). Legislation at the national level was not passed in the United States until 1935, and the first old-age pension was not paid until 1940. In part, the expansion of disability benefits to Civil War veterans (even if they had not been injured or seen combat) in 1890 provided a de facto pension system for northern whites but did not promote the implementation of a more general national pension system for nonveterans (Orloff and Skocpol 1984).

The reasons why Civil War pensions did not lead to a more comprehensive social security system have been examined extensively. The historical persistence of individualist, laissez-faire values obstructed public support for public programs (Rimlinger 1971). Big business preferred private negotiations with labor, and small business wanted to avoid the cost of social security provisions. Relative to a powerful business community, weak, decentralized labor unions were unable to agree on a common approach or push redistributive public programs as they did in several European nations (Stephens 1979). Relatedly, the United States did not have a socialist or social democratic party committed to labor goals, because regional, ethnic, and racial divisions split clearly defined class interests in support of social legislation. Southern congressional representatives, who wanted to maintain cheap agricultural (particularly black) labor in their region, used their power in a committee-dominated federal government to block legislation (Quadagno 1988). Finally, the lack of a professional civil service bureaucracy to administer the program and the existence of often corrupt patronage politics at the local level might have limited public support for a large public social security system (Skocpol and Ikenberry 1983). All these forces played a role in blocking attempts in the first several decades of the twentieth century to expand protection beyond the veterans' pension and partial state-based programs for mothers' pensions or industrial accident insurance.

The impetus for the passage of old-age and unemployment social security came from the Great Depression. The rapidly expanding costs of private pensions and a crisis of capitalist growth lessened opposition of big business to federal pension legislation and a more general role of the government in the capitalist economy ( Jenkins and Brents 1989). Southern congressmen were persuaded to support legislation that excluded agricultural and domestic workers and insisted that means-tested levels for old-age assistance be set at the state level; both factors would limit the disruption of the low-wage southern economy. Popular demands in the early 1930s by several hundred thousand supporters of the Townsend movement for a federal government pension for every citizen over age 60 may have hastened enactment (Williamson et al. 1982). Ultimately, the goal of reducing unemployment by removing older workers from the labor force and supporting at least temporarily those who were unemployed proved crucial in passing the initial legislation in 1935 (Schulz 1988; Graebner 1980).

The original 1935 Social Security Act mandated only limited coverage and benefit levels for old-age retirement. Only 60 percent of the workforce was covered: Agricultural, domestic, and self-employed workers; military personnel; federal, state, and local employees; and employees of nonprofit, tax-exempt organizations were all excluded. Moreover, benefit levels were quite low: Policymakers intended not to replace work income fully or assure the maintenance of workers' preretirement standard of living but instead to supplement private sources of retirement income with minimal public benefits (Achenbaum 1986). Social Security benefits alone would hardly meet what would be considered poverty levels in many states at the time (Quadagno 1984).

The initial structure of the social security system, along with the incremental changes made in the following decades, was for the most part market-conforming. Early debates about the degree to which the program should redistribute income across classes were settled in favor of those who wanted to maintain the connection between contributions and benefits (Cates 1983). Funding from general revenues was rejected in favor of contribution-based financing, reinforcing the view of the system as an insurance system. Flat-rate benefits were rejected as unsuitable for a nation with such regional and social heterogeneity; instead, benefits would reflect preretirement income levels. A cap placed on taxable wages, which ostensibly concentrated both contributions and benefits for ordinary middle-income wage workers, introduced some regressiveness into the formula. The major exception to this strategy was that benefits for low-wage workers were higher relative to contributions than were those for high-wage workers (Myers 1981). Also, provisions for unemployment benefits, aid to dependent children, and relief for the blind targeted modest benefits for needy groups (Achenbaum 1989). The system thus began as and remains a mixture of social insurance based on contributions and social adequacy based on social need (Munnell 1977).

Expansion of the system began before the first benefits were paid out and continued for several more decades. In 1939, dependents and survivors were made eligible for benefits. Coverage was extended in the 1950s to include most self-employed, domestic, and agricultural workers, and the participation of state and local employees was made elective (federal employees kept their own system until 1984). In 1956, actuarially reduced benefits were made available at ages 62–64 for women, and in 1961 the same option for early retirement was made available to men, an option now exercised by a majority of new beneficiaries. Also in the 1950s, benefits equal to those for retirees were added for disabled persons aged 50– 64 and later for disabled workers of all ages. In 1965, Medicare for the elderly and Medicaid for the poor were added to provide protection against the high costs of medical care. Benefit and contribution levels also rose with extensions of coverage and disability. Ad hoc adjustments to benefit levels, which well exceeded inflation (Tomasson 1984), were common until 1972, when benefits were linked to yearly increases in the consumer price index. Payroll taxes and the maximum taxable wage also increased.

The growth of benefits and coverage nonetheless proceeded more quickly than did that of contributions, and by the late 1970s this situation resulted in funding problems. The concept of the accumulation of a reserve was replaced quickly by a pay-as-you-go system in which current workers paid for current retirees (with enough of a surplus to cover year-to-year fluctuations). In the early years of the system, the ratio of one retiree to 120 workers made this system of funding workable. By the 1970s, the ratio of retirees to workers was one to five. Combined with increasingly high benefit levels, the growing dependency ratio resulted in payments that exceeded contributions. Amendments in 1977 "deliberalized" benefits for the first time by, among other things, freezing minimum benefits and making the earnings test more stringent (Tomasson 1984). Far from sufficient to deal with the implications of higher benefits and an older age structure, these changes only delayed a more serious restructuring. A $17 billion deficit in 1983 made further deliberalization necessary. In 1981, a Reagan administration proposal to lower benefits, change the retirement age, delay cost-ofliving increases, and reduce family benefits for dependents and survivors was met with nearly universal opposition. To move the negotiations out of the public eye, where painful and politically unpopular choices could be agreed on, a bipartisan commission was appointed to develop proposals to deal with both short-term and long-term funding problems (Light 1985). The commission offered a compromise plan that was quickly passed by Congress and signed by President Reagan.

To summarize a complex 1983 amendment, a number of major changes were made in the direction the system was to take compared with previous decades. For the first time, Social Security benefits above specified levels were to be taxed. The age of eligibility for full retirement benefits would be extended gradually to 67 beginning in 1999, and payroll taxes would be increased along with the maximum taxable wage base. All these changes have had the desired effect: Contributions now exceed benefits paid. The long-run projection is that the surplus accrued during the next thirty years probably will balance the expected deficit when large baby boom cohorts reach retirement age (Social Security Administration 1989). The surplus, however, is by law used to purchase Treasury bonds, which fund deficits in general revenue spending. Since the bonds will have to be paid off by taxpayers through general income taxes later on, funding problems will not disappear.

The cumulative changes in the system now result in the coverage of over 90 percent of workers, who qualify for benefits by accumulating forty quarters, or ten years, of covered employment. Besides the basic benefit, a minimum benefit is available for those with long-term covered employment at low wages, a dependent's benefit at 50 percent of the spouse's benefits is available to spouses, and a survivor's benefit is available at 100 percent of the deceased spouse's benefits. Supplemental Security Income (SSI) provides cash assistance—unrelated to contributions and funded from general revenues—for needy aged, disabled, and blind persons who meet the means test. Among the elderly, 38 percent of all income comes from Social Security, and a majority of elderly persons depend on Social Security for more than half their income (Sherman 1987).

The position of the U.S. Social Security system relative to those of other nations depends on how generosity is measured. As a percentage of gross domestic product (GDP), the U.S. systems ranks quite low. Considering pensions alone, however, a measure of the benefit of a new retiree as a percentage of the wage of the average manufacturing worker ranks the United States higher. The United States falls slightly below average for single workers and slightly above average for married workers (Aldrich 1982). Part of the discrepancy stems from the concentration of public spending on pensions in the United States to the neglect of other programs. The family allowance spending and free health care for the nonaged that are common in other advanced industrial democracies are absent altogether in the United States except for need-based public assistance such as Aid to Families with Dependent Children and Medicaid. The United States provides well for those whose contributions during their work lives are high—the average retiree, in other words—but spends less in the aggregate for those who are not covered. Finally, the low percentage of the aged in the United States relative to other advanced industrial nations makes it possible to replace an above-average proportion of preretirement wages while spending a below-average fraction of GDP.


Many developing nations have begun to implement more formal social security systems, primarily for the benefit of urban workers and civil servants, but few of those countries have the economic resources needed to provide more than minimal coverage or protection from economic contingencies (Midgley 1984). Comparative studies have concentrated on the historical emergence and current policies of mature welfare states in advanced industrial nations.

Among the high-income democracies, substantial variation exists in spending levels and the structure of benefit distribution. Including pension, health care, occupational injury, unemployment, family allowance, public assistance, and related programs for civil servants and veterans, mean spending as a percentage of GDP in 1980 was 19 percent (International Labour Organization 1985). Nations that spend the most include Sweden (31.2 percent), the Netherlands (27.6 percent), Denmark (26.2 percent), and France (25.5 percent), and the nations that spend the least are Japan (9.8 percent), Italy (11.3 percent), Australia (11.6 percent), and the United States (12.2 percent). As was discussed above, countries also vary in the extent to which they rely on universal benefits relative to insurance or need-based benefits. According to Esping-Andersen (1989), Sweden and Norway in particular have the most equalizing social security programs; Finland, Denmark, Belgium, and the Netherlands also structure benefits on the basis of citizenship rights. The English-speaking nations and Switzerland tend to base their systems most on market-related criteria.

A comparison of the maximum and minimum benefit levels of pensions during the 1980s further illustrates important intercountry differences. In the United States, the difference between the maximum and minimum benefit is $9,900; in West Germany, it is $11,000 (Social Security Administration 1985). These figures contrast with those for nations with primarily flat-rate systems, such as Canada ($500), Denmark ($1,300), and the Netherlands ($0). Nations also differ in the frequency of adjustment for the cost of living, the ages of eligibility for early or normal retirement, the degree of retirement required for the receipt of benefits on reaching retirement age (i.e., the existence of a retirement test), and the wage ceiling for social security taxation. Scales summarizing national differences on all these dimensions provide an overview of the divergence in pensions (Day 1978; Myles 1984).

In the 1950s and 1960s, scholars predicted convergence in social security systems as advanced industrial technology spread: The standardizing effects of technology would reduce preexisting cultural and political differences among the economically developed nations. The need for a recently trained, highly educated, and geographically mobile labor force in industrial economies would make older workers superfluous to the production process. Without means of employment, the elderly would depend on government programs for economic support. In this functionalist framework, the state meets the needs of business for a differentiated labor force while simultaneously meeting the financial needs of surplus workers unable to find employment (Wilensky 1975). Hence, retirement and social security grew rapidly among all developed nations, especially in the decades after World War II.

Similar convergence in social security systems is predicted by neo-Marxist theories of monopoly capitalism. Here the focus is on the requirements of the capitalist mode of production and the power of the capitalist elite. State-sponsored insurance subsidizes the costs of the production of capital, and state-sponsored social assistance helps maintain the legitimacy of the political and economic system in the face of discontent among the superfluous population (O'Connor 1973). The standardizing force is therefore the needs of increasingly monopolized capital to maintain high profit and investment, but the consequence is still the expansion of the state in similar forms among advanced industrial nations. Partisan democratic politics play a minimal role in either the industrialist or the capitalist logic.

The fact that in contrast to the predictions of convergence theories, expenditure levels have continued to diverge across nations over the last several decades has led more recently to a number of political explanations of variation in social security. The most common explanations focus on the differential political power of labor unions across the advanced industrial democracies. In places where labor is centralized and unions have high membership, labor gains power in negotiation with capital and also can contribute to the election of socialist, social democratic, and labor parties that represent its interests. As a result, social legislation decreasing the scope of the market and emphasizing distribution based on political power emerges in areas where labor is strong and leftist parties have ruled for significant periods. In places where labor is weaker and more fragmented, rightist parties are more powerful and market-reinforcing programs with low benefits are common. Relatedly, the emergence of corporatist bargaining structures in which officially designated representatives of labor and capital negotiate economic policy with state managers has emerged in some nations—usually small nations with a strong political representation of labor. The corporatist bargain has been for labor to hold down wage demands in return for full employment and generous, redistributive welfare spending (Goldthorpe 1984).

Other theories agree with the importance of political forces in generating divergence but focus on the political activity of the aged as well as on classes (Pampel and Williamson 1989). Even among the advanced industrial nations, substantial differences in the percentage of the aged exist and appear to be related to welfare spending through both demographic and political channels. Given the same benefit level in 1980 as in 1960, aging of the population can account for only some of the observed increase in pension spending. However, the size of benefit increases over time correlates closely with the size of the elderly population. Beyond demographic effects, then, the elderly appear, at least in some countries, to be an influential political interest group in supporting higher pension and health care spending.

Others have emphasized the role of the state in divergent social security policies. Beginning with the assumption that public policies cannot be reduced to the demands and preferences of any single social group, state-based theories have examined how the structure of relatively autonomous state agencies and the interests of state managers can shape the way in which demands are expressed and translated into legislation. Qualitative studies have identified, within specific historical and national contexts, the state characteristics important for particular policy outcomes. The quantitative literature, however, has had less success relating state characteristics such as size and centralization to measures of social security spending or citizenship rights.

Any resolution of the theoretical debates and mixed empirical results will come from synthetic efforts at theory building and statistical analysis. Class, status-demographic, political, productive, and state factors all may prove important for understanding social security system development once theories and models more clearly specify how one set of factors varies with the levels of the others. Efforts to estimate nonlinear, interactive models are under way and should prove crucial for future research (Hicks et al. 1989; Pampel et al. 1990).


The huge literature on the consequences of social security spending for social equality and social behavior is beyond the scope of this article. Controversy exists not so much on whether spending has an effect but on the kinds of social phenomena it most affects.

One view is that social security spending directly reduces economic inequality without substantially changing social behavior such as labor force participation, living arrangements, and savings. The major evidence in favor of redistributive consequences comes from studies that subtract transfers from total income and compare inequality with and without those transfers (Smeeding, et al. 1988). In the United States and a number of European nations, pretransfer inequality and poverty are higher than they are for posttransfer income distribution. According to the results of this methodology, expenditures for pensions are particularly egalitarian. However, advocates of this view have been less willing to accept the claim that transfers promote inequality by providing incentives to leave the labor force, in other words, by inducing behavior that indirectly contributes to higher rates of poverty and inequality. Implicitly, unemployment and low income are seen as the result of discrimination and lack of opportunities, situations that do not change with the receipt of benefits.

Other views weigh the behavioral responses to transfers as important relative to the redistributive consequences. If transfers induce labor force and living arrangement changes that make pretransfer income distribution less egalitarian than it would be if transfers were not present, the evidence of redistribution cited above would have to be seen as flawed (Danziger et al. 1981). For instance, pensions have the largest effect in reducing pretransfer inequality but also induce voluntary retirement that lowers earnings relative to what they would be without pensions or retirement benefits. Similarly, transfers increase an individual's ability to afford independent living arrangements, and this makes pretransfer income figures misleading.

Trends in poverty and inequality do not provide unambiguous evidence for either view. Certainly, the absolute income of the elderly in the United States has risen with the growth of Social Security benefits. As Social Security benefits rose dramatically in the last several decades, poverty among the aged declined from 35 percent (compared with 22 percent for the general population) in 1960 to 12 percent (compared with 13 percent for the general population) by 1987 (U.S. Bureau of the Census 1989). However, the improved economic position of the elderly also stems from the fact that recent cohorts entering old age have been better off financially and more likely to have accumulated private pensions and savings to support themselves than were previous cohorts. For overall income inequality, the trend shows little change (at least until 1980) despite the massive growth of transfers (Levy 1987). Either transfers were not redistributive or pretransfer inequality increased. Perhaps household changes, in part an indirect response to transfers, balanced the direct effects of transfers on inequality (Treas 1983). After 1980, inequality grew, but again, it is difficult to separate the effects of changes in the occupational structure from changes in real Social Security benefits for the poor and unemployed.

Comparative evidence on the relationship between social security spending and inequality across advanced industrial nations is also mixed (compare Pampel and Williamson 1989 with Esping-Andersen 1985). Nations with high spending levels and benefit structures based on citizenship rights, such as those in Scandinavia, have always had lower levels of income inequality among both the aged and the general population. However, it is difficult to establish a causal association between those levels and social security benefits across nations that differ in so many other social and economic characteristics.

Given the mixed empirical evidence, views on the redistributive consequences of the welfare state reflect theoretical assumptions about the determinants of the levels and structure of social security spending. Neo-Marxist theories of monopoly capitalism, which assume that high inequality is an inherent and necessary feature of advanced capitalism, argue that social security systems help maintain that structure rather than change it. Interest-group and neopluralist theories see middle-class, politically powerful groups as the primary recipients of most spending, which limits the extent of redistribution to the poor. Other theories claim the opposite. In industrialism theories, spending is directed at the surplus workers who are most in need. In social democratic theories, spending is directed to the working class and the poor represented by leftist parties and unions. Still others claim that the state and institutional context shapes the ability of spending to reduce inequality. As in the study of the determinants of spending, interactive or contextual studies probably will be needed to make sense of the comparative experience.


A number of issues or problems face policymakers who deal with social security systems. A few of these issues are reviewed briefly below. Some apply especially or primarily to the United States, while others apply to all advanced industrial nations and third world nations.

First, concern has been expressed over the inequitable treatment of women in earnings-related social security systems. When receipt of benefits for women in old age depends on the benefits of their spouses, high rates of marital breakup and widowhood make reliance on this source of financial security risky. When receipt of benefits of women in old age depends on wage contributions, discontinuous labor force participation during the childbearing years penalizes women. Universal benefits provide some support for older women, but other policy options are emerging to deal more directly with the gender-based problems. Some nations give social security contribution credits to women who leave the labor force to raise children or split the earned credits of a couple equally between the spouses. Classification of welfare state regimes needs to consider gender as a component of social rights (Orloff 1993).

Second, the improved economic position of the elderly, declining poverty rates, and higher public benefits in the 1970s and the 1980s stand in contrast to the declining real level of benefits and increasing poverty among children in the United States. The improved position of the elderly relative to children may stem from the increasing size and political power of elderly cohorts compared to the smaller cohorts of children (Preston 1984). The fact that benefits for children take the form of means-tested social assistance—a type of program that receives weak public support relative to pensions because it is not shared by large parts of the population—also contributes to this inequality. Other nations that have family allowance systems that provide cash benefits to all or nearly all parents have experienced little concern over generational equity.

Third, after decades of expansion, policymakers must face problems in balancing continued demands for more spending with limits on taxation. On the one hand, with the problems of support that still exist among vulnerable groups such as the oldest old, minority group members, and widowed women, more spending is needed. Increasingly expensive health and long-term care for the elderly and disabled add to the cost of social security systems. Despite the cost, support for pension and health care continues to be strong (Coughlin 1980). On the other hand, critics have argued that the rising costs of social security contribute to inflation and unemployment by reducing savings and productivity. Those who are more sociologically oriented suggest that high expenditures tend to weaken community and family bonds, which ultimately are the source of protection for those in need (Glazer 1988). Certainly, concern with high tax levels has led politicians to attempt to control spending and reduce taxes in nearly all advanced industrial democracies. Balancing these goals without resorting to deficit spending will remain the task of governments in the decades to come.

Fourth, concern over population aging relates to debates about controlling the cost of social security. The difficulties in meeting funding demands are likely to worsen in the next century with the entrance of large baby boom cohorts into old age. In part, this is a problem of declining fertility, which reduces the size of younger, working cohorts relative to older, retired cohorts. In the recent past, when the relative sizes of working and elderly cohorts were reversed, social security recipients were treated generously, receiving benefits worth five to six times their contributions and the accrued interest (Wolff 1987). Future retiring cohorts are not likely to experience such high returns on their contributions and are sometimes skeptical of receiving any at all. Still, funding problems for aging populations are not insurmountable. Many European nations, whose fertility levels fell faster than those of the United States, already have aged populations as large as 17 percent of the total—levels that will not be reached for thirty years in the United States. Through appropriate political and economic policies, the United States can meet the needs of its elderly population (Aaron et al. 1989).

Finally, these issues are emerging as important in third-world nations. Although the percentage of the aged in those nations is small and social security remains primarily a family rather than a state responsibility, that situation can change quickly. Rapid declines in fertility sharply increase the percentage of the aged, make family care for the elderly difficult, and generate demands for public support. With scare resources, the state may risk being overwhelmed by these demands. Public understanding of the process of building social security systems in those nations remains meager.


If they follow the trends of recent years, the first decades of the twenty-first century will see demands for both stability and change in social security programs in the United States. In terms of stability, major changes in the system have been difficult to legislate. In the late 1980s, Congress passed legislation to add coverage for catastrophic health care and prescriptions to Medicare by increasing taxes on the affluent elderly. The funding mechanism avoided cross-generational taxes on workers but concentrated the costs of the new benefits on a relatively small part of the aged population that already had supplemental private health care coverage. The vocal opposition of those paying the higher taxes for the new provisions led Congress to rescind the legislation shortly after the new program began. Concentrating the costs of expanded social security programs on a small group of beneficiaries did not prove successful; sharing the costs among persons of all ages and among all the recipients appears crucial to the success of any changes in social security programs.

Another major social security initiative to improve health care in the early 1990s also failed. After entering office in 1993, President William Clinton proposed a form of national health care that represented the most substantial change in American social security protection since the 1960s. The proposal did not advance a single-payer model of national health care such as those used in Canada, the United Kingdom, and many other European nations but aimed to provide universal coverage through a complex system of public and private health care delivery. Reflecting in part the suspicions of citizens of a huge change in government's role in health care as well as resistance to the change from the health and medical care professions, Congress rejected the proposed legislation.

Just as efforts to expand social security programs have failed, so have efforts to cut benefits substantially. Proposals by Republicans to control Medicare, Medicaid, and Social Security costs have met with acute resistance that has essentially blocked legislation. These examples indicate the desires of citizens for stability in most social insurance programs. Social assistance programs have, however, undergone major changes. With bipartisan political support, Aid to Families with Dependent Children has been renamed Temporary Assistance to Needy Families and now contains a work requirement for the continued receipt of benefits. The lack of change in social insurance programs and the major change in social assistance programs reflect the broad-based support for the former relative to the latter. Means-tested programs have never had the public approval enjoyed by insurance programs (Marmor et al. 1990).

In terms of demands for change, much concern remains about the long-term future of social security programs even as citizens resist short-term changes. As the baby boom generation approaches retirement age and the expected future deficit in the Social Security Fund comes closer, worries about funding have reemerged. Some economists predict serious problems. Thurow (1996, p. 46) states, "Already the needs and demands of the elderly have shaken the social welfare state, causing it for all practical purposes to go broke." Even if it is not broke, Social Security probably will provide returns on contributions to future generations of retirees that do not reach today's high levels. According to Kotlikoff (1992), those age 25 in 1989 will pay $193,000 more in taxes than they will receive in government benefits over their lifetimes; in contrast, those age 75 in 1989 will receive $42,00 more in benefits than they pay in taxes. Despite the uncertain assumptions about the future contained in these forecasts, they present a disconcerting picture. As a result of these sorts of claims, polls show that young workers doubt that Social Security will even exist when they retire (Kingson and Berkowitz 1993, p. 87).

Given future funding concerns, recent federal budget surpluses have generated a desire to "save" Social Security. Ironically, the surplus results in large part from Social Security revenues that exceed current payments and thus mask deficit spending in other parts of the government, yet the surplus has produced debate about how to proceed. Some want to return the surplus to taxpayers in the form of tax cuts that, under the assumptions of supply-side economics, will generate economic growth and make it easier to support the large baby boom population of retirees in the decades to come. Others want to use the surplus to invest in Social Security by paying off current government debt that in future decades would aggravate the problem of funding retirement benefits. No legislation has passed yet, and policies change quickly with economic and political circumstances. The consensus seems to be to use part of the federal surplus for debt reduction toward the goal of Social Security solvency. However, unexpected military costs, such as those for the Serbian–Kosovar conflict, can reduce the surplus and eliminate its use for Social Security.

An alternative approach to improving Social Security solvency in the twenty-first century is to privatize contributions. An extreme version of privatization would follow the lead of Chile in allowing individual workers to invest their contributions in private accounts that fund their own retirement. The shift from a pay-as-you-go program to a funded program would involve an enormous change in the nature of old-age benefits that would create numerous risks (Williamson 1997). A less extreme version recommended by a recent commission on Social Security would allow the government to invest some contributions in stock funds. The stunning upward movement in the stock market in the mid-1990s brought enormous returns to those with private pension investments and highlighted the low returns provided by the current system of using surplus contributions to buy government bonds. Controversy over government involvement in the stock market has, however, slowed action on the commission's recommendations.

Economists have taken the initiative in making policy recommendations for social security, while sociologists have aimed more to defend the current system against attacks. More than sociologists, economists tend to view the low rates of return on old-age contributions and the work disincentive effects of social assistance with alarm. Sociologists, in contrast, highlight the threats of privatization to social equality and universalism in public benefits (Minkler and Estes 1991), the government's role in social protection (Quadagno 1996), and the widespread sense of generational solidarity that citizens share in their attitude toward Social Security (Bengtson and Achenbaum 1993). Their contribution will continue to come from studies of the consequences of varied social security policies across the high-income nations for social equality (Esping-Andersen 1990; Korpi and Palme 1998), generational relations (Cohen 1993; Marmor et al. 1994; Myles and Quadagno 1991; Pampel 1994), and economic well-being (Rainwater and Rein 1993; Crystal and Waehrer 1996).

(see also: Government Regulation; Public Policy Analysis; Retirement; Social Gerontology)


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Fred C. Pampel

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